Royal Legacy: How the royal family have made, spent and passed on their wealth

by McClure, David

  The meeting on the Civil List was not long under way before Anthony Barber raised the sensitive issue of the Queen's private resources. The Chancellor was worried that there "could be difficulties over this issue…Many reasonable people including government supporters felt that since Her Majesty and her predecessors had paid no personal taxation and estate duty, the private resources could not be regarded as private in quite the usual sense. It was at least reasonable that the facts should be known."1

  It was left to Lord Cobbold, the more senior member of the royal household, to attempt to deadbat this tricky delivery. He had been Lord Chamberlain, in effect the non-executive chairman of the household of Windsor plc, since 1963 – the first holder of that office to be drawn from the professional world having risen through the ranks of the Bank of England from advisor in 1933 to Deputy-Governor in 1945 and finally Governor from 1949-1961. In total he served under six different Chancellors and by virtue of his personal authority and diplomatic skills maintained a constructive relationship with each of them. For all the individual warmth he exhibited in private, at work he was known to cultivate a certain aloofness. He was married to Hermione Bulwer-Lytton, the daughter and heir to the second Earl of Lytton, whose 15th century ancestral seat was Knebworth House in Hertfordshire (a generation later to be turned into a world-famous rock concert venue by their son, David). Educated at Eton and King's College Cambridge and holder of the Knight Grand Cross of the Victorian Order, Cameron Fromanteel, the First Baron Cobbold of Knebworth, possessed all the requisite establishment credentials to open the batting for Her Majesty.

  Surprisingly, Cobbold opted for a front-on, open stance when it came to negotiating the inheritance bouncer. "Lord Cobbold said he did not know the Queen's mind on this matter,” recorded minute six of the meeting, “but he thought she might be willing to make a statement not on her personal resources but on her inheritance." This would involve the three issues of: the inalienable assets of the Crown (such as her collection of paintings) which although valuable earned no income; the private residences of Sandringham and Balmoral that George VI brought from his brother which again could be shown to bring in no income; and her inheritance of financial assets (which was more problematical and might be dealt with by the Queen authorising him to confirm that this inheritance amounted to "not more than £X").

  On the whole the Chancellor welcomed such a statement from the Queen, although he felt that the precise meaning of "inalienable" could be clarified. Known for his lack of pomposity, Tony Barber was cut from very different cloth to Lord Cobbold. A grammar school boy from the east riding of Yorkshire, he studied for a law degree in his spare time before becoming a barrister and later MP for Doncaster and then Altrincham and Sale. In 1970 Prime Minister Edward Heath - a friend and someone from a similarly unprivileged background - made him Chancellor of the Duchy of Lancaster with responsibility for EEC entry but when Iain Macleod, the Chancellor of the Exchequer, died suddenly a few weeks into office he was catapulted into the Treasury.

  Some of his cabinet colleagues doubted if he was really up to the job – and even Barber wondered if he had the requisite Treasury experience, confiding to Heath’s private secretary before the cabinet reshuffle: “I hope he’s not going to ask me to be Chancellor.”2 Later he would become best known for the short-lived "Barber boom," an attempt to reflate the UK economy before joining the Common Market which due to the OPEC oil price rise ended in bust. A wiry prematurely bald man, his slight frame and thin voice belied a wry wit. He was the crafty spin bowler taking on the gentleman batsman from the palace, although anyone watching the game would have been forgiven for believing that at times they were actually playing for the same team.

  The other presence in this game sitting well above the fray like a team coach in the home dressing room was Barber’s boss, Edward Heath. The Prime Minister had made him Chancellor because he needed a trusted lieutenant who would do his bidding in one of the key offices of state. Although a moderniser when it came to the economy and the need for Britain to replace the Commonwealth with the Common Market as its main trading partner, on anything to do with the royal family and court ritual, Heath was, according to his biographer, “a convinced monarchist.”3 He greatly valued his weekly audience with the Queen (“you can speak with complete confidentiality to her. You can say things you would not even say to your number two,” but unfortunately the feelings were not reciprocated.4 Her Majesty did not find him an easy conversationalist (another courtier thought Heath “tricky” and that HRH was never entirely comfortable with him).5 The Queen who went out of her way to forge personal relationships with all her prime ministers whether Conservative or Labour, found it almost impossible to penetrate Heath’s famed carapace. With no small talk and little in the way of charm, he could appear brusque and impolite. “The monarch never succeeded in developing an easy relationship,” wrote the journalist and political insider Hugo Young, “a failing that gave Her Majesty something in common with much of the human race.”6

  At the beginning of the round of bargaining over the revised Civil List, Barber had his doubts about the palace's case for a significant pay increase for the monarchy. He favoured an annual vote from parliament and no increase in the size of the annuities given to senior royals. For his part Cobbold advocated an index-linked grant of public money and a sizable increase in annuities. He was opposed to a separate plan to finance the spending totally from hereditary revenues, while his nightmare scenario was for the government to take total control of palace income and expenditure. But where they both appeared to agree was that the size of the Queen's wealth must be kept away from public scrutiny - at all costs embarrassing questions from parliament must be avoided.

  There was also agreement on the related issue of whether the Queen's bankers should be allowed to give evidence to the select committee. Recently the press had been speculating wildly on the size of the Queen's bank account and other assets with figures ranging from £50 million to £100 million being touted. Sir John "Jock" Colville, a director of Coutts, the royal bankers, and a former personal secretary to the Queen when she was Princess Elizabeth, later wrote to The Times saying that £2 million was much nearer the mark and a palace spokesman seemed to confirm the ballpark figure. When this sensitive matter was discussed by Lord Cobbold, a former Bank of England Governor, Ryrie recorded that "it was agreed that firm resistance should be put up against any proposal to ask the Queen's personal bankers to appear or to ask Her Majesty to agree that they should give evidence."7 Throughout the deliberations considerable thought was given to limiting the list of witnesses to a small, select and controllable group.

  The real significance of the select committee inquiry into the Civil List was that it threatened to bring the sovereign’s private fortune into the open for the first time. All previous Civil List reviews had been undertaken behind closed doors with no official records taken of the oral evidence. Barber was initially opposed to full disclosure but was forced to relent under pressure from MPs. As the Queen's biographer Ben Pimlott observed, "the committee put the Crown more seriously on the defensive than at any time since 1936…The emphasis, more than ever before, was on justifying, not merely expenditure, but also the need to incur it…The Queen, through her close advisors, had to present a convincing case that she gave value for money."8 What happened during the eight months of select committee scrutiny was a struggle between parliament and the palace (often aided and abetted in private by the Treasury) to reveal the full extent of the monarch's inherited wealth. At times, it took on the character of not so much as a game of cricket but as a chess match with the courtiers thinking two or three moves ahead in order to thwart a gambit or outflank an attack on the Queen from MPs. At stake in the game was the financial independence of the monarchy.

  As with all official inquiries, the composition of the committee was crucial. The issue had been debated at length even before the Conservative government took office. Back in 1969 the Labour Prime Minister Harold Wilson face
d with growing pressure from the palace about the under provision of the Civil List had decided that the only way to resolve the funding crisis was to set up a new select committee and in an effort to avoid a row with parliament about “a pay rise for the Queen" and to take the politics out a highly combustible issue he got the agreement of the opposition leader Edward Heath that the establishment of the committee should be delayed until after the election. When the Tories surprisingly won in May 1970, Heath continued the bipartisan approach and had a quiet word with Wilson about what was the best way to proceed. We know from the released papers that Barber then wrote to Wilson on 8 April 1971 to arrange a meeting to discuss "how the problem might be dealt with…I think you will agree that it would be helpful to the work of the select committee if we were to have an exchange of views confidentially."9

  They eventually met in May with Wilson being accompanied by Roy Jenkins, the deputy Labour leader, to discuss who should be on the committee and whether its evidence should be made public. While Wilson remained devoutly pro-monarchist and did everything in his power to expedite a favourable settlement for the palace, Jenkins, the former Chancellor of the Exchequer, was more sceptical about any pay rise for the Queen. In the wake of the election defeat, Labour was moving to the left and Jenkins was much more in tune with the mood of the party than Wilson, who was regarded by some backbenchers as an establishment lackey.

  In the end, the selection of the select committee resulted in a Commons compromise. On the one hand, the palace would have been pleased to find many dyed-in-the-wool loyalists on the Committee - led by ultra-monarchist Norman St John Stevas, a friend of the Queen Mother, and ably supported by two establishment-minded men: John Boyd-Carpenter, whose family had close ties with every sovereign since Queen Victoria, and Sir Fitzroy McLean, who was another regular dinner guest of the Queen Mother and whose aristocratic wife was on first name terms with several senior royals. The committee which was chaired by a Conservative Chancellor with the assistance of the Leader of the Commons William Whitelaw would have a built-in Tory majority.

  But to the dismay of the palace a few members of the awkward squad were also included. The most troublesome was Willie Hamilton, MP for West Fife and author of the forthright republican blast "My Queen and I" who achieved notoriety for a series of ad hominem attacks on members of the royal family (he famously described Princess Margaret as "an expensive kept woman," lambasted the Queen as "a middle aged woman of limited intellect" and dismissed her supporters on the committee as “diligent sycophants"). Hamilton was the son of a Durham miner and his visceral hatred of the royal family could be traced back to his experience as a schoolboy during the 1926 general strike and his parents telling him that the monarchy represented the pinnacle of “wealth, privilege and exploitation.”10 More sophisticated scrutiny could be expected from the experienced trio of Roy Jenkins with his wealth of knowledge from the Treasury, Douglas Houghton, who in the last Labour cabinet had been Chancellor of the Duchy of Lancaster and Joel Barnett, a skilled accountant and member of the Public Accounts Committee who would go on to become Chief Secretary to the Treasury.

  On the credit side for the palace was the absence of one parliamentary troublemaker who had long taken a hostile stance on the Civil List review, Richard Crossman. Secretary of State for Health and Social Security in the previous Labour administration, the member for Coventry East had stepped down from frontline parliamentary politics in 1970 to become editor of The New Statesman where in an article entitled "The Royal Tax Avoiders" he nailed his republican colours firmly to the mast by launching a vitriolic attack on the royal family's financial privileges. He argued that you had to take into account the private inherited wealth of the Queen when assessing how much Civil List money was voted to her by parliament.

  When his controversial cabinet diaries were posthumously published after a failed gagging order by the Civil Service, they revealed how several senior members of the government shared his republican sympathies and how they and other ministers were kept in the dark about secret discussions concerning a revised Civil List. In the entry for 11 November 1969 - just two days after the Duke of Edinburgh had caused a media storm by complaining about the inadequate state funding for his housing - he disclosed how Barbara Castle, the Secretary of State for Employment, and like him and the Chancellor Roy Jenkins a republican - was so enraged by Prince Philip's comments that she called for a special parliamentary committee to investigate the Queen’s private wealth. Much to Crossman's amazement it emerged in the inner cabinet deliberations that discussions on the palace finances were already well advanced and unbeknown to the cabinet, the Prime Minister and his Chancellor had been plotting to try to transfer as much royal expenditure as possible away from the Civil List and into the budgets of government departments.11 Crossman was particularly annoyed by the way a blind eye was turned to the sovereign's privileged inheritance position, namely the vital exemption on death duties which allowed her to accumulate so much wealth.12 The Prime Minister seemed not remotely concerned about this tax free fortune – an oversight he attributed to Harold’s strong royalist sympathies.

  But one former Labour cabinet minister did throw a ratchet in the works of the well-lubricated machinery of the Select Committee. Using his knowledge gleaned as the Chancellor of the Duchy of Lancaster as well as chairman of the Public Accounts Committee and work with the Inland Revenue as its staff association secretary, Douglas Houghton came up with a proposal to turn the royal household into a government department - the Commissioners of the Crown. The Queen's staff would effectively be civil servants paid directly by grant from parliament like any other department. This would protect the palace from inflation since if a shortfall arose due to an increase in wages or prices parliament could vote through any additional funds in their annual grant. No one could accuse the Queen of getting a personal pay rise since under the new transparent funding arrangement it would be clear that funding was going directly into palace expenditure rather into her personal pocket. Public scrutiny would be guaranteed through a government minister responsible for royal expenditure and answerable to parliament.

  In theory, everyone should be happy. Indeed, the plan got the backing of not just the Labour party where it was the official policy but also of a significant number of backbench Liberals and Conservatives. So, with this broad cross-bench support how would the palace respond? On 30 June 1971 Lord Cobbold while residing in Holyroodhouse Palace in Edinburgh as part of the Queen's Scottish summer sojourn dispatched a remarkably blunt letter to the Chancellor voicing Her Majesty's hostility to the plan: "The Queen has confirmed her view to me in no uncertain terms. Her Majesty would see grave objections both on grounds of management efficiency and on grounds of wider principle to transfer of the control of her Household staff out of the hands of herself and her officers.”13 Later the thinly veiled threat from Lord Cobbold was spelt out in a Treasury memo: “The whole scheme depends upon the willingness of the Queen and her Household to be reorganised along these lines, which Lord Cobbold indicated in evidence is unlikely. It is not clear for example that the Queen would wish to continue to occupy Buckingham Palace on these terms. If the Palace were in effect a government department she might well wish to live elsewhere in her personal capacity and appear at the Palace only for official functions."14 So, now not only the Duke of Edinburgh but the Queen too was issuing threats to move house.

  According to Cobbold's letter, Her Majesty's official objection was that the transfer to departmental control would undermine the independence of the monarchy: if a new Whitehall department were set up with authority over the royal household, then this would inevitably mean the presiding government would have to be involved which could weaken the non-political status of the Crown.

  But behind this position of principle was the long-standing fear that it would result in the palace being financially beholden to parliament - and liable to the political whims of a future government which might be unsympathetic to the monarchy. This anxiet
y was revealed in an internal Treasury memo marked ‘confidential’: "it would be unlikely to be acceptable to the palace as it would leave the monarchy entirely dependent on parliament from one year to the next."15 The same memo disclosed the real reason why the government was also hostile to the idea. The last thing it wanted was to take on the added administrative burden of running another Whitehall department: "it would entail the maximum Ministerial and Parliamentary involvement, since it would open up Royal Household expenditure to audit by the C and AG [Comptroller and Auditor General] and inquiry by the PAC [Public Accounts Committee]. In effect it would leave ministers permanently and directly responsible for all royal expenditure in detail." It also failed to address the separate issue of the individual annuities of members of the royal family, which had nothing to do with the cost of running the palaces.

  Despite their deep reservations about the Houghton scheme, the government felt duty bound to comply with a request from the select committee to draw up a feasibility study. Confidential Treasury notes reveal how the delicate manoeuvring between Whitehall and the government was the stuff of a “Yes Minister” plotline. In the role of Sir Humphrey, Lawrence Airey, the Treasury undersecretary, wrote on the 19 July 1971 to the Chancellor's private secretary, Bill Ryrie, a note aptly entitled "Management - In confidence”: "I have tried to make the description of the new department as plausible as possible since to put something which the committee could see was an understatement of the case would be likely to be counterproductive."16 Although he does admit that "the main objection to this scheme from the government's point of view is the degree of detailed responsibility for royal expenditure which it would involve for ministers and the extent to which the expenditure would be questioned in parliament.”